The current market, especially on the east coast is got a major problem to work off, and the liquidation of a major airline could be the catalyst in my opinion. Usually if a major airline would file for bankruptcy protection, they would look to quickly boost revenue through slashing fares. Surprisingly, in US Air's previous filing and UAL's current protection, they seemed to have avoided that path through it appears internal discipline. But the market is currently saddled with excess capacity at too high of a cost. Gentle steps won't work now. US Airways has a per-seat mile cost that is something like double Southwest. And even at the fares that the majors are resorting to, there is still idle capacity; i.e. not enough demand. The tough (some would say good) part is that through a liquidation, "Hard" inter changeable assets, like a 737, don't go away. With a flooded market for aircraft, if another airline entered bankruptcy protection (i.e. Delta) in an attempt to restructure costs, their pricing power of the aircraft owners/lessors is diminished. Either Delta gets a new lease on life (assuming improved labour rates), or they liquidate and the cycle continues. I don't think the true gyrations in the industry have even started. Matthew On May 10, 2004, at 10:46 AM, David W. levine wrote: > At 11:20 AM 5/10/2004, you wrote: >> Hi Everyone, >> >> With the recent report that US has to get more concessions from it's >> unions and/or sell-off assets, how viable do you think it's future is? >> If we all try to live in reality, how realistic is it they're going to >> make it? > > The hill they have to climb is massive, and the slope is > getting steeper. While there is a lot of fear about > WN at US, there's precious little evidence that they know > how to deal with the low cost threat. (Note: Not low fare, low > cost, low fare is a result of low cost, not the effect :-) > > USAirways had the past 12-18 months to fix things, before > they started to see the price and capacity pressure that's > now arrived at PHL. Frankly, they didn't do much that positions > them to resist the market forces that are going to show up. > > >> Also, if they do go out of business, what do you think will happen to >> the market in the eastern United States? Who's in a position to pick >> up >> the business from US's departure from the market place? AA? CO?=20 > That's a tough question. Some of the market goes over to the low cost > players, and that's that. If US vanishes from PHL, you have to imagine > that WN will be one of the major players to fill in the void. CO's > limited > in thier options, with the EWR hub up the turnpike, as, to an extent > are > AA and DL with thier extensive NY operations. UAL has slightly better > separation > with the hub down at Dulles, but they've got plenty of trouble to sort > out > already. > > You'll notice that only a few of the east coast cities operate as real > hubs. BOS, > JFK, LGA, BWI, IAD, RDU, are more gateway/focus city operations. > EWR and ATL are closer to full hubs, and MIA falls somewhere in > between. > > I'd expect to see a real cherry picking of the parts of US' franchise. > Someone > will grab the LGA based shuttle, it's too good to ignore. (AA is the > obvious > candidate, although CO would be glad to have it) > > It is less clear to me who would want the rest. I can see folks like > AA and UA > and the low cost carriers all filling in some of the capacity at PHL > and maybe > CLT. One of the problems is that US sort of does three things. They've > got > a lot of short haul stuff on the east coast, a fair bit of long haul > flying west, and a presence across the Atlantic. I'd think a lot of the > short haul stuff gets eaten up by some combination of the local > low cost boys. (JetBlue, Airtran, Southwest) and some by the > regional jet operations of the hub/spoke carriers. > > What's harder to see is how much international flying out of > PHL would remain, in a rationalized world. Without the (money losing) > major hub, is there enough O+D traffic to justify many of the > current destinations. Similar questions pertain to CLT. > >> Personally, I think CO's in a good position with EWR and (not too far >> away) CLE to pick-up much of the slack. AA may not do so badly with >> big >> ops at JFK, BOS and MIA. > > Proximity is going to be an issue. I'd expect to PHL become less of a > hub, > while not > necessarily losing traffic. WN and the low cost folks tend to drive > traffic, just not > connecting traffic. It might well be much harder to get a non-stop to > smaller domestic and international > markets, however. > >> I'd like to hear your thoughts. >> >> >> Clay - SEA > > > - David